Cross border insolvencies and financial restructurings are remarkably opaque considering we live in the Information Age. The mission of the Centre of Main Interest (the COMI) is to light some candles in the darkness and create a forum for further discussion. The Law Offices of Tally M. Wiener, Esq. are pleased to publish the COMI blog.
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Tuesday, October 30, 2012

Ruling Raises Fears Of Argentine Default

Per www.globalinsolvency.com:

Wed., October 31, 2012

An unexpected New York
court decision has raised the spectre of an Argentine government
default, causing a rise in the cost of insuring against a payment
failure and rattling the country’s bond market, the Financial Times
reported. The 2nd US Circuit Court of Appeals in New York late last
week ruled that Argentina was legally barred from prioritising payments
to bondholders that participated in debt exchanges in 2005 and 2010. The
case had been brought by Elliott Capital Management and Aurelius
Capital Management, two hedge funds that declined to participate in the
past restructurings. They hold defaulted debt with a face value of
$1.4bn. But Argentina has pledged never to negotiate with the holdouts,
calling them “vulture funds”, and is barred by a so-called “lock law”
from making any better offer than it did in 2005 and 2010. The hedge
funds could try to target Argentina’s interest payments on the two
exchanged bonds, which are paid via the Bank of New York Mellon. But
unless Argentina increases its payments it would leave less for the
restructured bondholders and lead potentially to a technical default.
“If the order goes into effect, Argentina would essentially be prevented
from making payments on their external debt,” Citigroup analysts
Jeffrey Williams and Guillermo Mondino said in a note. With an appeal to
the US Supreme Court possible it is still unclear how the saga will
end, but investors increased bets that another default could be at hand,
and sold Argentina’s bonds this week.